Last year, congress passed the largest tax reform legislation in over three decades. The bill will leave some major impacts on your tax filings for this year. Though you might have a basic idea of the changes that have been made, there are certain factors that are yet ambiguous to most of the US taxpayers. These lesser-known factor have the potential to leave a major impact on your tax filings for the present year, and then onwards. So, here’s assessing the impact of these factors on the taxpayers, such as yourself.
A new standard deduction has been implemented
According to the expert tax advisor Matthew Ledvina, a majority of the Americans do not know about the standard deduction set for the single tax fliers, which is $12,000 at present. The single tax fliers had a standard deduction of about $6,350 before the reforms brought in by the new law. This bill has also increased the standard deduction to $24,000 from $12,700 for the married couples.
The higher deduction might seem like a great deal, but everyone will not benefit from it. The increase in standard deduction will not mean anything to you if $30,000 was the itemized deduction for you in 2017 because you are already over the numbers.
The personal exemptions cannot be used anymore
Many American still believe that they can claim personal exemptions. However, the new regulations have eliminated the standard amount of exemption ($4,050) that you can get for yourself, your partner, and each of the dependents.
Even though taxpayers no longer have the exemption that they can claim for the children, they get an increase in child tax credits now. The families are entitled to claim the child tax credit for $2,000 per child under the age of seventeen.
The individual tax rates have gone down considerably
The taxation rates for all the seven income tax brackets went down in 2018, as per the new laws. Before the tax reforms were introduced, the seven tax brackets were: 39.6%, 35%, 33%, 28%, 25%, 15%, and 10%.
The reformed rates for the same seven tax brackets are: 37%, 35%, 32%, 24%, 22%, 12%, and 10%. So, as you can see, there has been a considerable reduction in individual tax rates.
Local and state income tax deductions have been limited
If you are still under the impression that the limit on local and state tax deductions is $20,000, then you are not alone, according to Matthew Ledvina. The right amount, however, is $10,000. All the taxpayers who have itemized on the tax returns can deduct only $10,000 in local and state taxes on the federal returns. There was no limits set on this earlier.
Hopefully, the new tax laws are much clearer to you now. It would be easier for you to understand your tax filings for this year, regardless of whether you do it yourself or your financial advisor does it for you.
Published by Matthew Ledvina
Through his almost 15 years of experience working as a US tax adviser, Matthew Ledvina has provided advice to his clients on areas involving trusts, banking and taxation. This has required him to work in several of the world’s major economies, including the United States, France, the United Kingdom and Switzerland. Matthew holds memberships to multiple professional bodies, such as the Society of Trust and Estate Practitioners, the International Tax Planning Association, the International Bar Association, and the International Business Structuring Association. Serving in several senior positions for global tax advisory firms, Matthew has worked with clients in countries that span every continent, including Switzerland, Italy, France, Spain, the United Kingdom, the US and Canada, as well as in Asia and Latin America. Matthew co-founded a law firm in 2010 with locations in Geneva, Zurich and Madrid. The firm offered services that were focused on providing assistance and advice on taxation and trusts, serving clients in the US, France, Spain, Italy, Middle East and Latin America. Amongst other activities, he is currently a cross-border US tax adviser for Pilotage Private Office and a director for a leading Fintech company in London which focuses on asset-backed lending servicing the needs of family offices.Matthew became heavily involved in the US Department of Justice’s Swiss Bank Program through his work with Swiss clients. This has seen him undertake voluntary disclosures for clients who have assets in banks and other financial institutions based in Switzerland. In his spare time, Matthew enjoys playing tennis and skiing. In addition, he regularly reads about topics such as artificial intelligence, history, Regtech in the insurance and banking area, and Fintech focusing on asset-backed lending.View all posts by Matthew Ledvina
